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One Person Company

Created on 21 Aug 2018

Wraps up in 3 Min

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Updated on 13 Oct 2020

One-person company (OPC) is a new concept introduced for the first time in India, in the 2013 Act based on the recommendation of the J. J. Irani Committee. As per the definition enshrined in Sec. 2(62) of the Act, there will be only one member in the OPC. Only a natural person can be its sole member.

Characteristics

  • Only a natural person who is an Indian Citizen and resident in India can incorporate OPC.

In OPC, there will be only a single member. The Companies (Incorporation) Rules, 2014 require that such a member has to be a natural person who is an Indian citizen and a resident of India who has clocked 182 days of stay in India in the immediately preceding one calendar year. And also, a person cannot incorporate more than one OPC.

  • Legal entities like company cannot incorporate an OPC.

A company has the status of a corporate personality and is classified as a juristic or an artificial legal person, but such corporate personality does not accord it a status equivalent to that of a natural person or an Indian Citizen. Therefore, a Company, not falling within the ambit of a natural person or an Indian Citizen, cannot be the one person in an OPC.

The intention of the Companies Act and the Rules is to limit the formation of an OPC by natural person i.e. human beings as single members.

  • Minimum authorised capital is Rs 1,00,000.

Section 3(1) (c) of the Act classifies an OPC as a private company formed for lawful purposes by one person unless expressly excluded in the Act or the Rules. Therefore, an OPC limited by shares will require a minimum paid up capital of one lakh rupees and will have restricted rights to transfer its shares along with the inability to make invitations to the public for subscriptions.

  • A nominee must be appointed by the promoter during incorporation. 

The memorandum of an OPC requires the single member to nominate another person as a nominee, who will be entitled to the single member’s shares in the OPC, in the event of his death or incapacity. It must contain the written consent of the nominee, which must also be filed with the Registrar during incorporation along with the MOA and AOA.

 The name of the nominee can be changed by the member at any time after providing due intimation to the Registrar of Companies.

The nominee is entitled to withdraw his/her consent, in which case the sole member is required to nominate another member as a legal heir within 15 days of the notice of withdrawal. The nomination of new personnel must be intimated to the Company through a written consent in Form INC-3. The company, in turn, is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar in Form INC-4.

The sole member is also empowered to change the nominee at any time for any reason by providing a notice in writing to the company. The company must file the notice of change and consent of the nominee with the Registrar along with the applicable fee, within 30 days of receiving the intimation of change.

  • Businesses involved in financial activities cannot be incorporated as an OPC.

An OPC cannot be incorporated for or converted into a not for profit company with a charitable object. It also cannot carry out Non-Banking Financial Investment activities including investment in securities of any corporate body.

  • OPC must be converted to a private limited company when it’s paid up share capital is in excess of 50 lakhs and turnover is in excess of 2 crores.

Mandatory Conversion of OPC to Private Limited Company (PLC) is required when an OPC meets certain parameters, like:

a) Effective date of increase in the paid-up share capital of a One Person Capital beyond rupees fifty lakhs, 

b) An increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond rupees two crores.

The OPC shall be mandatorily required to convert itself into either a private or a public company within a period of six months.

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Deb P Samaddar

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Deb is a keen learner and eager to learn about the finance world. He is that person who would never stop talking, but my oh my, the words he uses, are not something a normal human would in a regular conversation. While the conversations are well, interesting, the write-ups are faultless. With an increased proclivity towards tech and language, he aims to capitalise on his interests as a content writer at Finology.

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